Southwest buys Airtran

[The Stig]

Pretty stunning news for those of us who follow the airline industry: finance.yahoo.com/news/Southwest-Airlines-to-Acquire-prnews-3710486497.html?x=0&.v=1

[hoyainspirit]

Stig, why is it stunning?

[DFW HOYA]

Three reasons:

1. Southwest isn't an airline looking to merge with anyone. While it has acquired assets over the years (PSA, Morris, ATA), it has largely avoided the merger wars. The consolidation to three legacy carriers (American, Delta+NWA, and United+Continental) , may have precipitated this move.

2. Airtran's Boeing 717 planes are anathema to the Southwest business and maintenance model.

3. It opens Atlanta for Southwest, the largest region not served by the airline. That's bad news for Delta.

[hoyainspirit]

Thanx.

[The Stig]

Well, for starters nobody saw it coming. With the other recent mergers, there was a lot of advanced warning. With Delta+NW and United+Continental, it had looked like the airlines were set to merge for months if not years before they finally pulled the trigger. With Frontier and Midwest there was a bit less warning, but it was still obvious what was going to happen for a week or so before the deal became final. The airline industry is generally pretty bad at keeping secrets, so to see a huge deal like this go down with absolutely no warning is pretty stunning. It would be like a top-5 recruit signing at GU when nobody even knew GU was recruiting him.

Second, it's pretty stunning to see Airtran, a fairly large and relatively healthy airline, just get snapped up like that. Airtran has been growing nicely as of late. They've been bringing in new planes and growing a profitable second hub in Milwaukee. There's been no real signs of any serious trouble. Just a few years ago they were looking for airlines to buy up for themselves (they got in a bloody bidding war over Midwest), and now they're the ones getting bought. It says a lot about Southwest's financial state that they can buy a large, healthy airline like Airtran without even breaking a sweat. They don't even have to get their own shareholder approval for it.

Finally, this runs completely counter to everything we thought we knew about Southwest. Southwest was always the airline that sort of stayed above the fray and always did their own thing, competitors be damned. When other airlines started cutting back on perks, Southwest stayed the same. When extra fees started flying around everywhere, Southwest sat back and laughed. When merger mania hit the airline industry, Southwest didn't look at all interested.

There's other changes too. This will see Southwest getting a major presence in airports like Atlanta, DC National, Boston Logan, and NY La Guardia. Traditionally Southwest always avoided these big, congested airports in favor of smaller airports. Southwest will also take on international flying as a result of this deal, something they'd never done (not even to Canada). Finally, Southwest will violate what we thought was their #1 rule: Thou Shalt Only Fly the 737. This is an airline that got airplane people super excited when they said they might think about considering a study to see whether they might want to operate a few examples of a larger variant of the 737. Now all of a sudden they buy Airtran and say they'll keep Airtran's pretty large fleet of 717's, a completely different airplane type! For an airline like United or Delta this wouldn't be big news at all, but when Southwest does it it's enough to make people's heads explode.

As a somewhat amusing side note, the 717 seems to be a cursed airplane. It's a lovely plane to fly on and it's a great plane for its operators, but seemingly everything it touches gets destroyed. McDonnell Douglas designed it, but before it flew they got bought by Boeing. Boeing kept building it, thinking it had a great market to serve, but regional jets came along and destroyed that market, then 9/11 happened and finished off what the regional jets had missed. 9 airlines bought it initially, 1 got rid of the planes pretty quickly, and 6 went broke or got bought out. Until today people held up Airtran as the only success story for the plane, but now that's gone too. And to cap it off, Boeing tore down the factory in Long Beach where the planes were made, thus destroying the last place in California that built airliners (California used to build most of the world's airliners).

.... and now I see that DFW basically posted the exact same thing in a much more readable post!

[hoyainspirit]

And thanx for your reply, too, Stig.

[jerseyhoya34]

This may also do away with the RyanAir style of AirTran. While not as cheap as Ryan, they serve the equivalent market. Fly at slightly ungodly hours at below the "market rate" of the Continentals of the world. You may even get a direct flight to airports that the major carriers don't serve. I don't see that model surviving this deal but hope to be surprised.

[kchoya]

Can't imagine SWA would go through with this unless they had all the details figured out on how to make it work. They've been run about as well as a major company could be run over the past 15-20 years. This will be interesting.

[Boz]

If it brings Southwest to Reagan airport, I'm for it.

Southwest is a fine airline, but BWI is a bitch. Same goes for Dulles.


(I'm speaking mainly of convenience. I don't really care too much that BWI or Dulles might have that one bar with the really great microbrew that you can't get anywhere else.)

[SFHoya99]

I hope this doesn't ruin Southwest. They are an incredible airline and they don't have the benefit of youth that Virgin Atlantic and Jet Blue have.

I'd hate to see this make them more like the crap that is the big airlines.